- Bitcoin is poised for a significant upward trajectory in this market cycle, as per BitMEX co-founder Arthur Hayes.
- Though Bitcoin’s price has remained relatively stable recently, Hayes believes U.S. fiscal policies will catapult it to new highs.
- “The extensive government spending and monetary expansion will reinvigorate Bitcoin,” stated Hayes with confidence.
Arthur Hayes foresees a bullish outlook for Bitcoin, driven by escalating U.S. fiscal policies and inflation.
The Local Inflationary Period and Bitcoin
Arthur Hayes categorizes economic history into two periods: local inflationary periods and global deflationary periods. Since 2008, the U.S. has experienced the latter, driven by quantitative easing measures post-financial crisis.
“During local inflationary periods, financial repression of savers helps fund ongoing and past conflicts,” explained Hayes. “Conversely, global periods promote deregulated finance and global trade.”
Historically, Hayes noted that gold is a solid investment in inflationary periods, especially when trust in governing authorities wanes.
Key to this era, however, was the birth of Bitcoin in 2009, a digital currency built to outshine gold. Bitcoin’s capped supply and digital nature make it a formidable asset, enhancing its appeal from 2009 onward.
Recession and the Expansion of Credit
Despite recent actions by the Federal Reserve to curb inflation through interest rate hikes and balance sheet reductions, Hayes observed that credit in the economy is still growing. This credit expansion negates anti-inflationary efforts and supports asset values including Bitcoin.
“Now, it’s crucial to closely monitor credit creation by commercial banks,” Hayes noted. Much of this credit supports fiscal deficits, underpinned by government debts bought by commercial banks.
Hayes referenced a forecast from the Congressional Budget Office, which predicts a $1.915 trillion budget deficit for fiscal year 2024—second only to the pandemic era. Meanwhile, the Atlanta Fed projects a 2.7% real GDP growth for Q3 2024, diminishing recession fears.
“These fiscal and monetary conditions are likely to remain loose, which makes holding crypto assets like Bitcoin a strategic move for wealth preservation,” Hayes concluded.
Conclusion
Arthur Hayes argues convincingly that the ongoing economic policies and credit expansion in the U.S. will foster a favorable environment for Bitcoin growth. Despite current price stagnation, the interplay of local inflationary pressures and government fiscal policies are expected to drive a new rally in Bitcoin’s value. Investors would do well to monitor these conditions and consider the benefits of holding Bitcoin in such an economic landscape.
